Planning your Household Budget

Writing out a household budget can be a complicated thing. While some people just look at their immediate rent or mortgage, food, transportation and entertainment budget, there are many more factors in a family budget. A family with two or three children must plan for the future of those children. If they are healthy, it is expected they will eventually be self-supporting, but the educational process can last until age 25 and beyond in some professions. Family savings can also be quite complicated. Social Security is worth only so much, and under new budgeting plans will not go into effect at full value until a person reaches the age of 70, for young people now entering the workforce. This means that it is necessary to set up an IRA plan or a 401k or other retirement investments.

Savings can be a tricky subject as well, because there are both short-term and long-term savings. There is the $100 a month you have to put away for Christmas/Holiday presents for friends and family, and more money for that if you plan any major purchases. Every family needs some amount of immediately accessible emergency fund in addition to insurance, in case there is sickness, unemployment or accidents in the home or to the family vehicles.

Healthcare expenses as well can be tricky. Many health plans on the surface look comprehensive, but watch out for extra expenses. Even a little thing like a $30 deductible can easily add up. If infants need to go to the doctor once a month, over a year, that will be a $360 expense just for the office visit deductible. Unfortunately today, there are many health plans that in the case of operations or prolonged hospital stays require 5 percent to 20 percent out-of-pocket expenses for these extremely expensive medical procedures. Surgery, even of the run-of-the-mill type can easily approach and exceed $50,000. To pay 10 percent of that would require $5,000.

People tend to look at personal budgeting as something difficult, which it is, but this can be surmounted with careful planning. Admit that you are going to need $100 or more for even occasional childcare, don’t lie to yourself that the aunt or grandmother will always watch a child for free. Look at your expenses in terms of different categories. For example there are fixed expenses such as housing, clothing, transportation and food, and there are more variable expenses such as entertainment and vacations. Identify what your income and expenditures are in a general sense and get them to match.

Tags: budget, Household, Planning

Creating a household budget

Creating a household budget
Here are some simple tips to aid in creating a household budget. Most important – be realistic.

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Tags: budget, Creating, Household

The Importance of a Household Budget

There are many things that will influence our financial lives, but perhaps nothing influences our finances and our financial future quite as much as a realistic and properly followed household budget. All too few of us have learned how to budget properly, and this failure to create a household budget can lead to all manner of financial ills.

One of the main reasons so many of us fail to create a budget is that we feel that creating a budget is overly complicated. In fact, creating a budget does not need to be at all difficult. Creating a budget can be as simple as writing down each expense and keeping track of it for a month.

The easiest way to do this is to carry around a simple budget sheet, which can be as simple as a small notebook. Into this budget sheet, write each item you purchase, from that morning cup of coffee to the muffler on your car. At the end of each week, enter this budget data into your favorite spreadsheet or budgeting program, assigning each expense a category as you go. This simple strategy will make it a great deal easier to keep track of your expenses going forward.

Often this simple budget exercise is a great eye opener for consumers, and a great way to recapture money that has been leaking out of your pocket. After all, that $4 daily cup of coffee may not seem like much, until your budget shows you that forgoing it by making coffee at home could save you over $100 per month. Those weekly dinners out may not seem like that big a deal, until your budget shows you where you could cut back without impacting your lifestyle.

The usefulness of the monthly budget is endless, and knowing where your money is coming from, and where it is going, is an essential first step when it comes to getting a handle on your finances. Until you take the time to establish and stick to a realistic budget, you may be unable to get a true picture of your financial situation.

There are many things families and individuals can do to improve their financial situation, from landing that promotion to taking on a second job. Few things will provide as much power, however, as finally sitting down and creating that household budget. The budget is the most basic of all financial documents, and it is important to take the bull by the horns and get that budget under control. Creating a budget is not easy, but the rewards are great.

Tags: budget, Household, Importance

How to Create a Household Budget

The “B” word sends a shudder down the spine of many people. It conjures up fears of never being able to do anything with their money. That it is somehow locked up in this budget and cannot be used for anything else. That in fact is not the case. A household budget is simply a way to see where all your money is going. And more importantly to give you a plan that tells your money what it is supposed to be doing, whether that’s paying bills, going into savings or retirement accounts, or to buy groceries.

Every successful business or person has a money plan. This is what a budget is, a plan for your money, telling it what to do instead of it telling you what to do. With a budget you can set and achieve your financial goals. You can also get a better view of what your money can do for you now and in the future.

With a household budget you can create a spending and savings plan that puts aside a certain amount of money each month for known and unexpected expenses. It will also give you a good record of your monthly expenses based on each month’s expenditures.

The first thing you need to do when setting up a budget is figure out what your monthly income is. If you have a salaried job this is easy because it is a set amount each pay period. If you work on commissions or are self employed this may be more of an estimate. Write this number down at the top of your budget sheet.

Now comes the fun part. Start writing down all your monthly expenses and include even the smallest of expenses. There are certain fixed expenses such as mortgage, car payments, insurance that you need to make every month. You will also need to track those expenses that are more fluid, such as groceries, gasoline, clothing, and entertainment.

If you start by subtracting your fixed expenses from your income what you are left with needs to be budgeted to pay for those expenses that seem to change from month to month. Once you are done allocating money to all your expenses what you are left with is either a positive or negative cash flow. The nice thing about a budget is you can quickly scan what you have written down and see exactly where the money is going. This is very helpful if you are living pay check to pay check because chances are you can find some areas that you can easily cut back on or do without to leave you with extra cash at the end of every month.

Here are four quick tips to help get your budget on track.

1. Learn money management – Successfully dealing with money is 80% behavior. Most people work for their money instead of having their money work for them.

2. Make a plan – A budget is a money plan. Most people would never dream of building a house without a plan. In fact most every activity in life involves some sort of plan. But our most important asset, our money, is left plan free and when we run out or are weighed down with debt we don’t know why.

3. Needs and Want – Know the difference. Needs are basic things like a home with a roof, groceries, clothes (in moderation), transportation to get to work. You don’t need a $400 plus car payment to get to work or a pair of $100 designer jeans. You may want them but you don’t need them.

4. Be a little frugal – This doesn’t mean live in a cave. You can still have fun but make sure it fits into you budget.

Creating a household budget is the first step to getting your finances under control. You will have to be patient with the process because chances are it will not work the first 2 to 3 months you do it. But remain diligent and around the third month you will begin to see patterns that will help you refine your budget into a financial plan that will set you on the right path.

Tags: budget, Create, Household

2 Tips for Creating a Household Budget

It’s not a word that most people like to hear but the answer to the eternal question “how can I successfully manage my personal finances?” is, make a budget. It’s not the answer most people want because the word “budget” seems to create a feeling of fear in many people. Fear that they will never have any fun again because their money is tied up in a budget.

Fortunately this is far from the truth because creating a household budget is nothing more then a “cash flow plan” that simply tells your money what to do. And what you choose to do with your money is up to you but a budget helps you determine the best course of action.

When you make a personal household budget there are two important tips to keep in mind. The first is to just get started. This can be the biggest problem for most people for any number of reasons. But the reality is that money budgeting is not really all that hard and once you get the hang of it you’ll wonder why you weren’t doing it sooner.

The first time you go about creating your household budget keep it simple. A notebook and pencil are all you really need to get started. By listing out your monthly income and expenses you can start to get a picture of what your money is doing. Income is fairly simple, just look at your pay stubs or bank statements to get a good idea of how much money you have to spend each month.

The most important part of your new household budget is the expenses. You need to make sure you leave nothing out so it can be worth the time to go back through you check book register, bank statements, and receipts to make sure you get an accurate reflection of what you spend money on each month. To get started you might want to divide your expenses up into the following four categories.

1. Housing: mortgage, rent, utilities, property taxes, insurance, etc.

2. Work: transport, parking, work clothes, lunches and if you have children, day care.

3. Living: food, clothing, medication, insurance, etc.

4. Personal: entertainment, newspapers, magazines, alcohol, gifts and education, etc.

This is a good starting point but how you decide to categorize your budget is up to you. Just be sure to write it all down and then add up your income and expenses and see where you stand. If you are living paycheck to paycheck there is a good chance you spend more then you make and your household budget will show you exactly where that money is going. It is here that you can start making adjustments to your spending habits and start freeing up all that money that seemingly is going to waste very month.

The second tip to keep in mind is motivation. Most budgets get thrown to the wayside after a couple of less then successful attempts at the process. The thing is you won’t do it perfectly the first time, or the second time, but by around the third monthly go around you’ll have a better handle on it and you’ll start to see progress. This is a process that does take some time but as your financial situation changes for the better it will get easier to work that budget every month. As you begin to set monetary goals and meet them instead of wondering where all your money went you’ll see that creating a household budget is definitely worth the time you have put into it.

Tags: budget, Creating, Household, Tips